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General Interest Oil & Gas JournalAugust 16, 2004

Multicyclic Hubbert model shows global conventionalgas output peaking in 2019

Asher Imam Richard A. Startzman Maria A. Barrufet

HUBBERT REVISITED—6

A new, multicyclic approach to modeling future global production of natural gas reaffiRMSan outlook for growing dependence of Western nations on the Middle East and Russia fortheir supply as global conventional gas output peaks in the next decade.

This multicyclic Hubbert model avoids some of the pitfalls seen with earlier Hubbert -stylemodels of future production peak and decline for oil and gas.

However, a lack of country data and questions over the future contribution ofunconventional gas resources mean that a completely accurate picture of future globalgas supply through even this improved model is not yet available.

Gas demand growthNatural gas is one of the world's most important energy sources. Its growth has been thefastest of all the fossil fuels in recent years.

While the share of oil in the world's total energy produced declined to 36.7% in 2000 from45% in 1970, the gas share went to 22.8% from 17.2% (Fig. 1).

OGJ Exchange/MadisonEnergy Advisors providesoil and gas acquisition anddivestiture services for thenegotiated sale of highervalue oil & gas properties. Use our GlobalEquipmentTrace (GET!)Network tosubmit your projectequipment requirements.

Originally broadcastNovember 13, 2003

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In just 20 years, global production of natural gas has increased about 1.7 times (Fig. 2),and the US Energy Information Administration predicts its use to double by 2020.

There are several reasons for this rapid increase in gas demand, such as availability inabundance, low price, and the fact that it is environmentally much cleaner than coal orcrude oil. It is therefore becoming increasingly important to get a better understanding ofgas production trends throughout the world and to forecast future production to aid indeveloping economic strategies regarding gas reserves management.

Today the US is the largest consumer of gas in the world. As Fig. 3 shows, US gasconsumption has exceeded its production in recent years. As a result, US gas importshave increased to 16% of total consumption. Due to this increasing dependency onimports, it is important for the US to get a better idea of what it can expect in the futureand plan accordingly.

The analysis in this article relies on a newly developed technique, known as the MulticyclicHubbert model developed by Al-Fattah and Startzman1 in 2000, to forecast future gasproduction trends for all the major gas producing countries.

This multicyclic model is a modified form of the original Hubbert model presented by M.K.Hubbert2 in 1956. Hubbert used one complete production cycle to forecast the crude oilproduction trend for the US. A Hubbert curve with only one production cycle is somewhatbell-shaped with a maximum production rate flanked by two symmetrical tails. As noted byAl-Jarri and Startzman, 7 oil production rates for many of the world's countries seem toclosely follow a single Hubbert curve with one production cycle. However, someobservers3 have noted that the original Hubbert model may be inappropriate forforecasting natural gas production. Different techniques4 5 have been suggested over theyears to improve the Hubbert model, but they usually require information that isunavailable or difficult to gather. Therefore, Al-Fattah and Startzman developed atechnique of incorporating two or more cycles of gas production to get a better match ofthe actual production data and achieve a better forecast.

Another problem that some critics have with the original Hubbert model is the symmetry ofa single bell-shaped curve that represents the entire production cycle. They point out thatthe decline rate after the production peak may be lower, in absolute teRMS, than theincline rate before it. This could be attributed to advances in technology that aid inproduction and cause the amount of oil or gas actually produced after the peak to behigher than the value expected from a single-cycle (symmetrical) Hubbert curve.

Although many areas of the world do, indeed, exhibit a symmetrical curve, it would seemreasonable that a Hubbert -type analysis should allow for the possibility that the declinerate will be lower after the peak. The Multicyclic Hubbert model takes care of this problem,as adding a number of Hubbert cycles results in lowering the decline rate after the peak. Amulticyclic Hubbert model is an improvement on the original model precisely because ittakes this possibility into account.

Natural gas production data from 1970 to 2002 is used in this study to forecast futureproduction trends for 46 major gas-producing countries in the world to 2050.

How it worksThe Multicyclic Hubbert model helps us determine the production rate (qcal), total ultimaterecovery (Gpau), cumulative production (Q), and future recoverable gas (Gfr). Themulticyclic model uses these equations:

Production rate

Click here to enlarge image

Total ultimate recovery

Cumulative production

Future recoverable

Click here to enlarge image

First, the historical production data for each country are examined, and then the numberof cycles is assigned.

The decision to assign the number of cycles to each country is somewhat arbitrary butsubject to the country's historical reserves additions and production trends. Once thenumber of cycles is decided, the multicyclic model (Eq. 1) then is employed to estimatethe production rate. A nonlinear least -squares method is used with initial guesses for ai,qmaxi, and tmaxi

. Here qmaxi and tmaxi

are the peak production and time, respectively, and'ai' is a constant. To obtain optimal values for these parameters, the root mean squarevalue (RMS) is minimized.

RMS = root mean square

qobs = observed production rate

qcal = production rate calculated from the model

n = number of observations

Once the optimal values of the parameters ai, qmaxi, and tmaxi have been determined by

minimizing the RMS, a future production trend can be forecasted. These parameters alsoare used to calculate ultimate gas recovery, Gpau. By subtracting the cumulativeproduction, Q, from the ultimate recovery Gpau, future recoverable gas, Gfr, can beobtained.

After forecasting production, models for all the countries are added to determine theglobal model. It is important to note that Hubbert -type methods examine only productiontime series. These time series are the result of a combination of exploration and discoveryvariables, technology, national policies, economics, gas demand, and otherconsiderations. These factors are very difficult to predict and analyze. Thus we are leftwith raw production data that may or may not demonstrate a clear trend.

We must therefore exercise caution when extrapolating historical trends. A majordiscovery, for instance, in a currently undeveloped ultradeepwater basin could significantlyalter world production trends. It is our view that forecasts of this type need to be updatedregularly. We must also clearly differentiate between "estimated future recovery" and themuch more strict term "reserves." Estimated future recovery from a Hubbert -type modelincludes potential future discoveries. Reserves are estimated from known, and thereforepreviously discovered, reservoirs.

Discussing resultsTable 1 presents a summary of the results for all countries. The countries have beendivided into six geographic regions. Table 2 presents the results for all regions and theworld in total.

Click here to enlarge image

Using the multicyclic method, world production is expected to peak at 88.428 tcf/year in2019. World cumulative production to date has been slightly less than 2,529 tcf. Ultimaterecovery is calculated to be 9,215 tcf, and remaining recoverable gas should be around6,686 tcf. This means that more than 72% of the world's ultimate recovery of gas remains

to be produced.

Figs. 4-11 show actual production data and forecast production trends for the world andeach of the six regions. Fig. 12 indicates how estimated natural gas recoveries aredistributed across the globe, while Fig. 13 shows the percentage of natural gas producedby each region in 2002.

Western HemisphereToday the Western Hemisphere has only 9% of the world's estimated future recovery (Fig.12), and its production in 2002 was 37.1% of the total (Fig. 13), making it the biggest gas-producing region in the world.

Click here to enlarge image

The multicyclic model suggests that production in this region had already peaked in 2000.Its ultimate recovery is expected to be 2,240 tcf, and more than half (around 56%) alreadyhas been produced.

The US passed its gas production peak in 1973. It seems that a major portion of itsultimate recovery already has been produced, as the US's cumulative production to date is

more than 85% of its estimated total recovery.

Other important producers in this region are Canada, Mexico, and Venezuela. Venezuela'sfuture recovery constitutes about 30% of the region's total. However, its production in2002 amounts to only 2.65%. Peak production for Venezuela is expected in 2044, andfuture recoverable gas is a huge 90% of the ultimate recovery.

Western EuropeThe amount of gas produced in Western Europe in 2002 was about 12% of the world total.

However, Western Europe now possesses less than 3.5% of the world's future gasrecovery. A multicyclic model of Western Europe suggests that this region reached aplateau during 1999-2002, with a peak of 10.293 tcf/year in 2000. Ultimate recovery isexpected to be around 494 tcf, and 49% of it already has been produced. More than halfof the major producers in this region are either past their peak or are about to be.

The UK, the Netherlands, and Norway are some of the region's top producers today. TheUK's current production trend suggests that its peak occurred in 2002, and we can expecta decline in its production in the near future.

Today less than 40% of the UK's total recovery remains to be produced. The Netherlandsalready has produced more than 80% of its ultimate recovery.

Click here to enlarge image

Norway has the largest estimated future recovery in the region, and with only 15% of itstotal recovery produced to date, it is expected to play a key role in the future of Western

Europe's gas sector.

Eastern Europe, FSUThirty six percent of the world's estimated future recovery is in this region, making it theregion with the largest indicated future gas recovery. It also is the second largest gas-producing region in the world.

Eastern Europe and the former Soviet Union have the highest ultimate recovery of anyregion. Only about 24% has been produced so far.

Other than Russia, Romania was the only significant producer in the region until recently.However, with the huge decline in production and devaluation of its estimated reserves,Romania's contributions have now become insignificant.

Click here to enlarge image

Turkmenistan and Uzbekistan now are emerging as significant natural gas producers inthis region, although their industry is still in its formative stages.

Russia, on the other hand, is the No. 1 country in the world today in teRMS of estimatedreserves and annual production. Although Russian gas production has seen a steadydecline since the fall of the Soviet Union, it is expected that its production will witnessanother cycle due to the presence of huge natural gas reserves in that country and itsimproving political environment, which is attracting foreign capital. However, there is alsoa general skepticism about Russia's reserves reporting, 6 which are classified as 'exploredreserves,' usually understood to be proved plus some probable reserves, while mostcountries of the world declare only proved reserves that are economically recoverable withthe present technology.

According to the multicyclic model, ultimate recovery and future recoverable gas forRussia are expected to be around 2,925 tcf and 2,236 tcf, respectively. This is the highestultimate recovery for any country. Nearly 76% of Russia's ultimate recovery is yet to beproduced.

AfricaNatural gas production in Africa has increased over the years. This trend will continue until2015, when production is expected to peak.

Ultimate recovery should be around 452 tcf, which is the lowest of all regions. However,future recoverable gas is high at 85% of the total.

Algeria, Nigeria, and Egypt are some of the significant reserves holders and producers inthis region.

Algeria is the world's fifth largest gas-producing country and secured the seventh positionin the 2002 list of top countries with estimated future recovery. With peak productionexpected in 2015 and nearly 80% of its total recovery yet to be produced, we can expectAlgeria to continue to play a role as a major gas producer for a significant time.

Nigeria has the latest production peak, which is expected to occur in 2089. With only 3.7%of its total gas produced so far, it is clear that natural gas will be prominent in Nigeria'sfuture for a long time.

Production in Egypt is expected to peak in 2012. Three quarters of Egypt's total recoverystill remains to be produced.

Our analysis show that, while Africa's future recovery is limited in amount, production willcontinue for a long time.

Middle EastMuch of the future of natural gas seems to be in the Middle East. This region has theworld's second highest estimated future gas recovery, and it has barely tapped into thoseresources.

Production in Middle East is expected to peak in 2039. Its cumulative production is merely4% of its ultimate recovery, which means that around 2,219 tcf of gas still remains to beproduced.

Iran, Qatar, Saudi Arabia, and the UAE are the major players, as they hold nearly 90% ofthe estimated future recovery and almost 84% of the total gas produced in this part of theworld.

Iran's model shows that production will peak in 2076 and is expected to ultimately produce1,094 tcf of natural gas. Its future recoverable portion is a massive 97% of its total. In factnearly half of the future recoverable in the Middle East will come solely from Iran. Thisamply de- monstrates the importance of this country's production trends to the region andthe world.

Gas production in Qatar is expected to peak in 2035. Its cumulative production so far hasbeen close to 2.61% of the total recovery (318 tcf). Qatar has produced the lowest of itsultimate recovery as compared with any other country in the world. This clearly indicatesthat it is producing far less than its potential.

Saudi Arabia will peak in 2046, and around 96% of its ultimate recovery remains to beproduced. With a peak this late and future recoverable gas of more than 420 tcf, SaudiArabia is expected to continue to be a major gas exporter in the future.

Asia Pacific

Future recovery in the Asia Pacific region is about 8% of the global total, and theproduction was close to 11% in 2002. The multicyclic model suggests that production willpeak in 2010, and ultimate recovery could be close to 742 tcf. With slightly more than19% of its total recovery produced so far, it still has a considerable amount of gas to berecovered in the future.

However, none of the countries from this region made it up to the top 10 recovery list, andonly one (Indonesia) was among the top 10 producers of 2002. Still, contributions ofcountries such as Indonesia, Australia, Malaysia, and China can be of significance in thefuture.

Indonesia's production has seen a steady decline in the past few years. This has had anadverse effect on its model, which suggests that Indonesia might have passed its peak in2000, and its future recoverable might now be less than 25 tcf.

Malaysia's production is expected to peak in 2012, and 83% of its ultimate recovery hasyet to be produced. This shows that Malaysia might play a significant role in the future ofthe gas industry, particularly in the Asia Pacific region.

The latest major gas producing country to peak in this region is China. It will witness itspeak production in 2044, and its future recoverable gas will be around 341 tcf, thirdhighest in the world, indicating that China might have an important role to play.

However considering its own size and population, domestic demand of energy is quitehigh. Therefore, we might not see China as a leading exporter of gas in the near future.

Where we standWhen looking at the results presented here, one thing is quite obvious: Now that theWestern countries are nearing the end of their reserves, they will become more dependenton the countries of the East to fulfill their energy needs if no other reliable energy sourceis developed.

Already Russia alone provides 30% of Europe's natural gas supplies. The US is planning tobuy more LNG from the Middle East and Russia. Table 1 shows the percentage ofultimate recovery that already has been produced by all countries.

It is easy to conclude that the countries with a high percentage in this category willbecome dependent on the countries with a lower one, in order to provide them with theirgas requirements in the future.

Also important is the fact that most of the countries with a high percentage are the onesknown as "developed countries." They have better infrastructure, political, and economicstability and therefore are more attractive to oil and gas companies. For example,examine the ultimate recoveries of Western Europe and Africa, which are quite similar.However, it is observed that although Western Europe is nearly half depleted, recovery inAfrica is even less than 15%. This is related to the operating environment, which generallyis quite favorable in Europe as compared with Africa—with notable exceptions north of theSahara.

Lack of infrastructure and political stability hinders the transfer of technology to theseunderdeveloped nations of Africa and Asia. However, it is expected that ultimately, as theresources in the West diminish, exploration and production companies will concentrateattention on the East, as that is where the future of gas production seems to lie. Morethan 66% of the world's future recoverable gas today resides in Eastern Europe/FSU andthe Middle East. In fact just two countries, Russia and Iran, control almost 50% of theworld's future recoverable gas.

In the present scenario the responsibility of the West is twofold. First, the West shouldprovide necessary help to these underdeveloped nations to build their infrastructure andtransfer to them technology required to economically produce their gas resources.Second, the world should now seriously and effectively start exploring and developingalternative sources of energy that are both reliable and economical because fossil fuelsare an exhaustible resource and sooner or later, we will run out.

ConclusionsThis study shows that the Multicyclic Hubbert model can be used as an effectivetechnique to forecast future production trends. It is an improvement on the originalHubbert model, as the use of two or more production cycles gives a better match to thehistorical production trends and consequently leads to a better forecast.

Forecasts should be updated regularly, whenever new data become available. Currently,only the countries with steady and significant production were used in this study. Lack of

data availability makes it impossible to model production trends of all the countries in theworld and then aggregate them to get a completely accurate global picture.

Our forecasting results may not be appropriate for unconventional gas produced from tightgas reservoirs, coalbed methane, gas shales, or hydrates etc. The Hubbert method reliesheavily on historical trends. Thus it has a considerable bias in favor of past productionstatistics. Recent trends, such as those that may emerge from newer sources of naturalgas, may take considerable time before they significantly influence a Hubbert analysis. Weexpect that these unconventional resources will play a role in the addition of reserves insome countries and will affect ultimate recovery. Thus it is possible that these newunconventional resources will form yet another Hubbert cycle when their role in the totalnatural gas picture becomes clearer.

References1. Al-Fattah, S.M., Startzman, R.A,"Forecasting World Natural Gas Supply," Journal ofPetroleum Technology (May 2000).

2. Hubbert, M.K., "Nuclear Energy and Fossil Fuels," API Drilling & Production Practices(1956) p. 17.

3. Wattenbarger, R.A., and Villegas, M.E., "Trends in US Natural Gas Production,"Advances in the Economics of Energy and Resources, J.R. Moroney (ed.), J.A.I. Press,Greenwich, Conn., (1995) pp. 9, 169.

4. Wattenbarger, R.A., "Oil Production Trend in the Former Soviet Union," Advances inthe Economics of Energy & Resources, J.R. Moroney (ed.), J.A.I. Press, Greenwich,Conn. (1994), pp. 8, 111.

5. Laherrére, J.H.: "Multi-Hubbert Modeling,"www.hubbertpeak.com/Laherrere/multihub.htm, 1997.

6. Grace, J.D., Caldwell, R.H., and Heather, D.I., "Comparative Reserves Definitions:USA, Europe, and the Former Soviet Union," paper SPE 25828 presented at the Societyof Petroleum Engineers' Hydrocarbon Economics & Evaluation Symposium in Dallas, Mar.29-30, 1993.

7. Al-Jarri, A.S., Startzman, R.A., "Worldwide Petroleum-Liquid Supply and Demand,"Journal of Petroleum Technology, December 1997, pp. 1329-1338.

This is the last in a series of six articles revisiting the peak-oil debate.

The authors

Asher Imam is an applications engineer with eProduction Solutions Inc. inHouston. He completed his bachelors in mechanical engineering from NEDUniversity of Engineering & Technology, Karachi, Pakistan, in 1999. Hegraduated from Texas A&M University in 2003, with a masters in petroleumengineering. Imam is a member of the Society of Petroleum Engineers andPakistan Engineering Council.

Richard A. Startzman is holder of the L.F. Peterson Endowed Professorshipin the Harold Vance Department of Petroleum Engineering at Texas A&MUniversity. His industry experience consists of 20 years with the formerChevron Corp. in management, research, and operations in Europe, theMiddle East, and the US. He consults with majors, independents, andservice companies in the areas of economics and reservoir engineering.Startzman has published over 100 technical papers and articles on reservoirengineering, production engineering, artificial intelligence, and petroleum

economics. His most recent contributions have been in the areas of petroleum supplyforecasting. Startzman's areas of specialization include reservoir engineering, economicevaluation, artificial intelligence, and operations research. He graduated from MariettaCollege in 1961 with a BS in petroleum engineering and earned an MS and a PhD inpetroleum engineering from Texas A&M University, in 1962 and 1969, respectively.Startzman is a member of the Society of Petroleum Engineers and was named aDistinguished Member in 1994. He is a member of Pi Epsilon Tau, Tau Beta Pi, Beta BetaChi, Kappa Mu Epsilon, Phi Kappa Phi, and Sigma Xi.

Maria A. Barrufet is an associate professor in the Harold Vance Departmentof Petroleum Engineering at Texas A&M University. She has been theprincipal or coprincipal investigator on projects sponsored by the USDepartment of Energy and various oil companies in the area of improved oilrecovery using thermal and chemical methods. She has over 30 publicationsin the areas of thermodynamics, phase behavior and phase equilibria of fluid

mixtures, profile modification, neural networks, and polymer flooding. Barrufet earned aBS in 1979 and an MS in 1983 in chemical engineering from the Universidad Nacional deSalta in Argentina and a PhD in chemical engineering in 1987 from Texas A&M University.Her research interests include enhanced oil recovery, equations of state for multiphaseequilibria, liquid-liquid-vapor equilibrium in steamflooding processes, reservoir simulationof near-critical fluids, hydrocarbon characterization methods, simplified methods to modelgravitational gradients in compositional reservoir simulation, multiphase flow, and rock andfluid properties. Barrufet is a member of American Institute of Chemical Engineers,Society of Petroleum Engineers, and Omega Chi Epsilon. She also is a member of theJournal of Chemical & Engineering Data advisory board.

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